I hate giving stock advice to a friend… but I do anyway
I love stocks and I love my friends. I think I have a good strategy and I know more about the stock market than most of my friends.
Still, I hate giving them advice about stocks. I would rather loose 1000 $ myself than costing my friend 50 $ on the stock market.
But what I can do, is give my friends advice on how to approach the stock market
I believe in my strategy.
In short my strategy is to buy a small amount of stocks every month. The stocks has to pay a dividend and I try to diversify as much as possible.
In the US it would problably be easier to find relevant ETF’s paying dividends, but in Denmark we have en tax-system that doesn’t understand ETF. In my strategy I build my own ETF of global dividend paying stocks.
Since I’m buying every month I don’t care about ups and downs in the stock market. Dollar-cost-averaging will save my poor choices in the top of the bull market.
My strategy has some great advantages:
I only buy small amounts of stocks every month. But in return I buy stocks in a lot of different companies. In stead of picking the one stock that will perform the best in the future, I can buy stocks in 10 of the most popular brands. If one company goes down, the others will benefit. I won’t get the best return compared to the experts who can predict the future and pick the best one, but I will get a pretty safe return.
This approach is all about leveling out your investments. You acknowledge that you can’t time the market and instead you buy stock continuously.
By continuously buying stocks I have the possibility of taking advantage of the powerful force of compounding dividends. When I get dividends in February I use them to buy additional dividend stocks in April. This is a snowball effect and I can not tell you how much I love it!!
By following this approach to buying stocks you will have a lot of fun. I like to research for dividend stocks with low PE ratio and dividend stability. I also enjoy getting dividends every month. They motivate me, and keep me at my toes.
But take notice: I don’t say this is the best strategy!!!
There are a lot of people trying to beat the market. I know I can’t. This strategy won’t give me the best possible return. But I’m pleased with a good return on my investment- It doesn’t have to be fantastic or remarkable.
I believe in the power of compound interest and this is my way to take advantage of it.
The strategy only works if you have a small amount to invest every month. It down’t work if you have a huge chunk of cash that you wan’t to put into the market all at the same time.